Pakistan’s Ministry of Finance has finalised a comprehensive strategy to transition the country to a Riba-free financial system by December 31, 2027, with all new government loans and transactions to be contracted exclusively on a Shariah-compliant basis from January 1, 2028.
Under the plan, existing conventional financing arrangements will not be abruptly terminated but will instead continue to be honoured and serviced in accordance with their original contractual terms until maturity. Conventional debt outstanding as of December 31, 2027, will then be progressively converted into Shariah-compliant financing on respective maturities.
To facilitate the transition, the government will ensure the availability of sukuk of varying tenors, including shorter instruments of three, six, and twelve months, to support financial institutions in managing liquidity. An Asset Registry Company, fully owned by the federal government, will be established to maintain a pool of non-current government assets to underpin regular sukuk issuance.
Majority foreign-owned banks and financial institutions will be permitted to continue operating a hybrid model, offering both Islamic and conventional financial products, reflecting the realities of Pakistan’s international financial commitments.
The legal and constitutional framework for the transition will be set in motion following formal approval by the federal cabinet. The strategy was formulated in light of the Federal Shariat Court’s April 2022 ruling declaring Riba prohibited in all its forms, and the 26th Constitutional Amendment of October 2024, which set January 1, 2028, as the deadline for its elimination.
As of end-December 2025, total assets of Islamic banking institutions in Pakistan stood at Rs14.467 trillion, reflecting a financial sector already well on its way toward this landmark transition.
